Police don’t have powers to raid under Exorbitant Interest Act: HC

NT Correspondent

Bengaluru: The High Court has quashed a case against two accused charged under the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004, holding that the police do not have the power under it to entry, inspection and seizure of documents.

The two accused, Basavaraj and Jakir Hussain, both from Gokak, Belagavi, approached the High Court against the case filed against them by the Gokak Town Police and pending before the Principal Civil Judge, Gokak.

They are charged under Section 3 and 4 of The Karnataka Prohibition of Charging Exorbitant Interest Act. A charge sheet was already filed by the police in the case before the two approached the High Court. The police accused them of charging interest at the rate of 10 percent per month on the amounts they lent to borrowers by pledging their vehicles.

They did not even have a licence under the Karnataka Money Lenders Act to lend money. The police had conducted a raid on the premises they were operating and seized documents; and then filed an FIR against them.

The counsel for the two argued before the High Court that the offences alleged against them are cognizable offences and therefore conducting of investigation before registering the FIR was impermissible as per the Supreme Court’s direction in the Lalita Kumari Vs Government of Uttar Pradesh case.

Further, it was argued that under Section 15 of the Karnataka Money Lenders Act, the Registrar, Assistant Registrar of officer authorised by the State Government alone has the power to search and make seizure in such cases.

Therefore, the charge sheet filed by the police is one without authority of law. The government’s advocate however, argued that the charge sheet clearly discloses that the accused, without possessing the requisite licence were charging interest at the rate of 10 percent per month.

Therefore, the magistrate court was right in taking cognizance after perusing the charge sheet. Justice Hemant Chandangoudar, in his judgment cited an earlier 2017 judgment of the High Court of Karnataka and said, “The conducting of the investigation before registering the FIR for the offences punishable under Section 3 and 4 of the Exorbitant Act is one without the authority of law. Section 15 of the Karnataka Money Lender Act specifies that the officers enumerated under Section 15 alone have the power of entry, inspection and seizure. Hence the entry, inspection and seizure of documents by the police are one without the authority of law.”

Quashing the case against the two accused, the HC said, “The registration of the FIR and consequently the filing of the charge sheet without following the said procedure is impermissible. Hence, this petition also requires to be disposed of in light of the order passed by the co-ordinate bench of this court.”